EMERGING MARKET MULTINATIONAL REPORTS The era of Chinese

EMERGING MARKET MULTINATIONAL REPORTS The era of Chinese multinationals Lourdes Casanova Anne Miroux Emerging Markets Institute

Casanova, L. ; Miroux, A. Emerging Markets Multinationals Report. 2016 -2017 -2018 - 2019. ISSN 2689 -0127 https: //ecommons. cornell. edu/handle/1813/66953 Lourdes Casanova, Anne Miroux Data Sources: WB/IMF/UNCTAD/OECD/MOFCOM Capital IQ, Bloomberg Fdi. Markets Orbis Factset Fortune Global 500 Global Innovation Index 2016: The China Surge 2017: Emerging Multinationals in a Changing World 2018: Reshaping Globalization 2019: Constructive Engagement Themes: E 20, M&A, Greenfield, price competition, Branding http: //bit. ly/bookchina

Casanova, L. ; Miroux, A. 2019. Emerging Markets Report 2019. Building Constructive Engagement. ISBN-13: 978 -1 -7328042 - 3 -4. ISSN 2689 -0127 https: //ecommons. cornell. edu/handle/1813/66953 1. The era of Chinese Multinationals 2. Revisiting China and the E 20 3. The Global South: Chinese investments in Latin America and Africa Special contributions: OECD development Center, EMRN and Wuhan University 4. State capitalism or Technology Springboard by Limin Chen, Wuhan University, China 5. Mexican Multinationals by Evodio Kaltenecker & Miguel A. Montoya, EGADE/Tec de Monterrey, Guadalajara, Mexico) 6. Social Innovation in Latin America by Veneta Andonova, Juana García and Maria Emilia Correa, School of Management Universidad de los Andes, Colombia 7. Korean Multinationals by Lorena Palacios and Jahir Lombana, Tec de Monterrey, Mexico and Universidad del Norte, Colombia 8. Better business for 2030 – Putting the SDGs at the core by OECD Emerging Markets Network, OECD Development Center 3

Key themes └ The global rise of Chinese firms has been rapid and dramatic └ They are different from their Western counterparts └ And have become formidable competitors: they break the ‘rules of the game’ └ And are now venturing abroad aggressively: pull and push factors └ So what should/can we do?

DRIVEN BY LOCAL ECONOMIC GROWTH, SCALE, CAPACITY TO ABSORVE KNOWLEDGE

And SUPPORT OF OFDI (USD billions): Top world investors (2000 -2018) (red E 20, blue G 7) Source: Authors’ analysis based on UNCTADstat, accessed by June 2019 in https: //hdl. handle. net/1813/66978.

Fortune Global 500: China catching up with the USA Source: Authors based on 2019 Fortune Global 500 data 2005 - 2019

Joining an exclusive group (red E 20, Blue G 7) Only 21 countries with more than 1 company + 13 countries with 1 (17%) Source: Authors based on 2019 Fortune Global 500 data https: //fortune. com/global 500/2019/ accessed by August 2019 in https: //hdl. handle. net/1813/66978.

Establishing dominance across sectors even if they are young Source: Authors based on 2019 Fortune Global 500 data 2005 - 2019, https: //fortune. com/global 500/2019/ accessed by August 2019 in https: //hdl. handle. net/1813/66978.

Key themes └ The global rise of Chinese firms has been rapid and dramatic └ They are different from their Western counterparts └ And they break the ‘rules of the game’s └ And are now venturing abroad aggressively └ So what should/can we do?

A strong influence of the State (red China, Blue US) 89% of U. S. companies are publicly traded versus only 23 % in China, while 66% es are state-owned or mixed versus only 1% of the U. S.

They tend to sacrifice margins (red China, Blue US) Source: Authors based on 2019 Fortune Global 500 data 2018, 2019, https: //fortune. com/global 500/2019/ accessed by August 2019 in https: //hdl. handle. net/1813/66978. The sectors are a classification provided by Fortune, which can change for some companies each year.

Key themes └ The global rise of Chinese firms has been rapid and dramatic └ They are different from their Western counterparts └ And they break the ‘rules of the game’ └ And are now venturing abroad aggressively └ So what should/can we do?

They compete on price To dominate markets

Their cost structures are still low Median salary of CEO of American 500 largest listed firms: USD 13 million Median salary China USD 167, 578. 75, in Beijing USD 335, 115. 63

They are Innovating (red China, Blue US)

Moving beyond price competition; improving in branding Still lagging behind in brand recognition But things are changing 100% 90% 80% 70% 45% 61% 60% 50% …. 40% 30% 20% 40% 35% 10% 0% 15% 4% 2009 2019 China Number of Us and Chinese companies in Fortune Global 500 and brand value rankings, 2018 US Other Share of China, Us and rest of the world in Top 500 global brands, 2018

Key themes └ The global rise of Chinese firms has been rapid and dramatic └ They are different from their Western counterparts └ And have become formidable competitors └ And are venturing abroad aggressively └ So what should/can we do?

Announced FDI greenfield projects 2003 -2019 (Million USD) Source: Author’s information based on data from f. Di Markets by Financial Times, accessed by August 20 th, 2019 in https: //hdl. handle. net/1813/66978.

Europe has become the top destination of M&A

Different motivations for venturing abroad BUILDING COMPETITIVE ADVANTAGE

Four case studies: ICBC, State Grid, Tencent and HNA biggest bank in the world by assets, present in 47 countries and territories powering China and the world, major investor in Brazil, $347 bn Enel $85. 28 bn EDF $77. 8 bn, GEIDCO project an innovative tech giant, with Ali. Pay behind mobile payments success in China, investing in online banks, 1 bn users, Facebook 2. 5 billion Successful conglomerate, with too many acquisitions

Top Power companies in the world (2019 revenues, US$ bn) State Grid Corporation of China US$347 bn ENEL US$85 bn EDF US$75 bn TEPCO US$55 bn

Key themes └ The global rise of Chinese firms has been rapid and dramatic └ They are different from their Western counterparts └ And they break the ‘rules of the game’ └ And are now venturing abroad aggressively └ So what should/can we do?

Key Messages Government policies, economic growth, scale, Capacity to absorb knowledge companies’ growth Economic Model: Long vs Short Term Source of knowledge & innovation Learning Competition continues Low price points Opportunity

Casanova, L. ; Miroux, A. 2019. The Era of Chinese Multinationals: How Chinese Companies Are Conquering the World. Academic Press. Elsevier. http: //bit. ly/bookchina Paperback ISBN: 9780128168578 e. Book ISBN: 9780128170601 Lourdes Casanova, Director Anne Miroux, Faculty Fellow @lourdescasanova Lourdes. Casanova@cornell. edu am 2449@cornell. edu